Markets shrug off looming Chrysler bankruptcy

Shares in the US shrugged off the impending bankruptcy of one of its car manufacturers by opening higher mid-afternoon.

Rather than focus on Chrysler's woes, investors in the US were cheered by comments from the Fed last night which left rates on hold after noting it was seeing signs of recovery.

An unexpected fall in jobless claims by more than 16,000 to 631,000 claims last week also provided a boost.

All eyes are now on Chrysler after the White House confirmed the car-maker will be filing for bankruptcy after some of its smaller lenders refused to reduce the amount of money the troubled automaker owed them.

However, even Chrysler delivered something of a silver-lining to investors, with talk that rather than collapse the car-maker will merge with Italian group Fiat once bankruptcy proceedings have been instigated.

In reaction, shares were higher at opening, with the Dow Jones Industrial Average ahead by 71.2 points, to 8,256.4, while the S&P 500 was ahead by 8.53 points to 882.17, at 14:48pm.

In the UK shares remained firmer, although off highs seen prior to midday. The FTSE 100 was ahead by 1.7% or 72.22 points, to 4,261.81, while the FTSE 250 advanced 2.5% or 181.47 points, to 7,539.45.

Financials continued to dominate the blue chips risers. Royal Bank of Scotland led the board, up 14.1% or 5.2p, to 42p, after it announced it was selling its 50% stake in a Spanish insurance group for €426 million.

Barclays and Lloyds Banking Group were also higher, up at 279.5p and 112.9p, ahead by 23p and 9.4p respectively, as bank shares continued to lead the rally.